Wall Street Analysts Weigh Health Policy Reforms, Trends

WASHINGTON -- Healthcare is seeing more vertical integration, especially between pharmacy benefit managers (PBMs) and insurers, according to Wall Street analysts and one health policy scholar on a panel here this week.

Separating prescription drugs from other aspects of managed care never made sense, because pharmacy benefits affect utilization and costs further down the care continuum, said Ana Gupte, PhD, managing director of Leerink Partners and one of the speakers at the annual "Wall Street Comes to Washington" panel sponsored by the JKTG Foundation for Health and Policy and the USC Brookings Schaeffer Initiative.

"Why would you have a different entity managing that member through one benefit, while hospital, outpatient, and other benefits are managed by managed care?" she asked.

Because vertical consolidation is so new, it's unclear whether they're going to be good or bad for consumers and payers, said Paul Ginsburg, PhD, director of the USC-Brookings Schaeffer Initiative for Health Policy and the panel's moderator. However, horizontal consolidation (e.g., hospital mergers) is widely believed to drive up prices for patients and payers.

For insurers, when an enrollee is using a lot of services, trying to understand that individual's medical problems from claims data alone is difficult, Ginsburg told MedPage Today in a follow-up phone call. By letting insurers know what drugs were prescribed, pharmacy data give more insight into patients' medical problems.

The Cigna and Express Scripts merger mirrors what other large insurers have done, including UnitedHeath, Ginsburg said. (United is a pioneer in such mergers according to Healthcare Dive.) The CVS/Aetna merger, on the other hand, is "fairly unique" in that CVS is a large retail drug chain as well as a PBM.

CVS is trying to delve more deeply into delivering medical services and is targeting seniors, Ginsburg explained, but panelists were generally skeptical of the merger's chances for success.

Curbing Drug Prices

Gupte was unenthusiastic about the Trump administration's recently announced plan for an "International Pricing Index" which would base payments for drugs in government programs partly on prices paid in economically similar countries.

"Everyone in Wall street has shrugged it off," she said, adding her sense that the initiative may be "diluted" or "delayed."

She was much more optimistic about another aspect of the administration's proposal: shifting from a "buy and bill" practice for Part B drugs, in which physicians are paid the average sales price drug plus 6%, to a flat fee, saying it "will make a huge difference," she said.

"If I'm an oncologist and the way I get paid is 6% of the drug I'm administering, what is my downside in a terminally ill patient? I'm administering to have multiple combo therapies.... The more I do, I'll say I tried everything."

A few years ago, Anthem, United, and Aetna started to give their oncology networks a fixed fee for each patient, couple hundred dollars per patient per month and a pay-for-performance bonus if they followed certain treatment pathways, Gupte said.

The Oncology Care Model adopted some of these private sector models, and the Center for Medicare and Medicaid Innovation started a pilot involving around 3,000 oncologists, she noted. Now its parent, the Centers for Medicare and Medicaid Services, appears to want to strengthen that model, she said. Together, these initiatives "will be a big thing," Gupte said.

Another idea that's been talked up by Sen. Chuck Schumer (D-N.Y.) is the Bayh-Dole Act, said Paul Heldman, managing partner for Heldman Simpson Partners.

Schumer has spoken about using the act to break patents for certain drugs. Heldman explained that "somebody would be able to make the argument that a drug price is so high that it's creating an access problem."

But the Bayh-Dole Act relates to technologies originating with research funded by the National Institutes of Health. The NIH has been "pretty firm" in declaring that this isn't an action that's within the authority of the law, Heldman said.

She said association-based and short-term plans will provide affordable options for individuals who are off the exchange and for those who don't receive subsidies.

"The deregulation could, in fact, at least help pull out ... some of the people from either the uninsured [pool] or give affordable options to those that are really getting crushed -- upper middle class people -- under the very partial subsidies or no subsidies," she said.

Ginsburg, in a phone call with MedPage Today, took a different view.

"I think they provide a real threat to the... quality health plans... by taking some of the healthier people out of their pools," he said.

But "we're both right," Ginsburg said. The plans could help some uninsured individuals gain insurance, while also attracting people who are already insured on the exchanges. The net effect will make insurance less affordable for the people who want good insurance.

Employers Providing Care

"There's angst and dissatisfaction [with healthcare] with the very large employers," said Gupte, pointing to General Electric, Comcast, Apple, Amazon, and Walmart as examples.

Many of these companies are pursuing direct-to-provider contracting, workplace wellness, concentric networks, "centers of excellence," and even offering transportation to employees to lower-cost hospitals, she said.

Both Amazon and Walmart are looking to carve out a niche in employer-sponsored benefits beyond their own workforce, Gupte predicted. Walmart, which has gotten less attention than other companies, is putting retail clinics in its parking lots, and has made strides in negotiating better rates, contracts, and networks for its employees, she said.

The coalition was also a "massive wake-up call" for other health plans, including as UnitedHealth and Cigna that served as carriers for JPMorgan. Both were caught "flat-footed" by the coalition's announcement, Gupte said.

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